2 More Instructive Cases
As I was thinking about the intersection between marketing blunders and business ethics, it reminded me of a quote by Warren Buffet, “It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently.” This is as true in personal life as it is in business life. Actually, “there’s no such thing as business ethics; there’s just ethics. And ethics makes no concessions for the real or imagined necessities of making a profit.” I wish I were the first to say these words but claiming that would be unethical. These are words of Michael Josephson, renowned for reviving and professionalizing character education, and I couldn’t agree more.
Here, I present two cases where things went sideways for two giants of the pharmaceutical world.
1. GlaxoSmithKline’s ‘Pandemic Flu’ Campaign (2009)
On April 23, 2009, the world first heard about a mysterious pig, bird, and human hybrid influenza virus that was making people sick near a Mexican pig farm. This virus, H1N1, was a subtype of the influenza A virus and caused a contagious respiratory infection that affected the nose, throat, and lungs. Symptoms could be mild to severe, but most people recovered on their own without intervention.
By April 30, the WHO had issued a Phase 5 “Alert” warning that the world was facing an imminent pandemic. At this time there were just several hundred cases of “swine” flu and less than 10 confirmed deaths. Pandemic scare sent stock prices soaring for drug companies making anti-viral drugs, rapid flu diagnostic tests, and influenza vaccines.
This pandemic is estimated to have caused about 284,000 excess deaths by the WHO-USCDC study and 148,000–249,000 excess deaths by the WHO-NIVEL study. In August 2010, WHO declared the pandemic over. A study done in September 2010 showed that the risk of serious illness resulting from the 2009 H1N1 flu was no higher than that of the yearly seasonal flu which kills 250,000 to 500,000 annually.
So, what happened here? Was this a real pandemic or just a bad case of seasonal flu? The fallout was swift and not pretty. Several pharmaceutical companies, including GSK, were criticized for their marketing strategy and overzealous promotion of flu vaccines and antivirals. Critics alleged that the companies capitalized on public fear to oversell their products using scare tactics to boost uptake of vaccines and antivirals. Marketing content was judged to be overblown, leading to concerns about profiteering off public fear.
There was another problem which became evident with the Covid-19 pandemic. People remembered this debacle and fearmongering, and too many did not take this later pandemic seriously. I heard so many people say that it is just another flu season. It was the shepherd boy crying wolf again. But this time the wolf was actually there. In the U.S., there have been 103,436,829 confirmed cases of COVID-19 with 1,210,707 confirmed deaths, the most of any country. I put some of the blame on these pharmaceutical companies and federal agencies for their tarnished reputation and recent history.
During the 2009 H1N1 influenza pandemic, some specific concerns raised included:
Exaggeration of Threat: Critics argued that the severity of the H1N1 pandemic was overstated in some messaging, fostering unnecessary fear among the public.
Conflict of Interest: There were allegations that some advisors to governments or international health organizations, such as the WHO, had ties to pharmaceutical companies, raising concerns about impartiality in public health recommendations.
Overproduction of Vaccines: In some countries, large quantities of vaccines were purchased but went unused due to lower-than-expected demand, raising questions about whether governments were pressured into over-preparing.
Transparency Issues: The lack of clarity in communication about risks, benefits, and the actual threat level of H1N1 fueled skepticism among the public.
Lesson Learned:
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- Companies need to avoid exaggerating health risks to promote products. Ethical and responsible advertising and marketing in the healthcare sector is essential to maintaining consumer confidence.
- The events highlighted the need for balance between encouraging vaccination to protect public health and avoiding fear-based marketing. Threat to civil liberties and risks to public health need to be carefully evaluated and communicated.
- Transparent collaboration between governments, health organizations, and the pharmaceutical industry are needed. The perceived global alliance between Big Pharma and Big Public Health can be fraught with conflict of interests and be a prescription for disaster.
- Independent parties must model demand projections.
- Choose the right messenger. When the U.S. Director of Homeland Security is the government official discussing the pandemic threat level rather than the U.S. Director of the CDC, people notice.
- Bypassing FDA regulations for demonstrating purity and potency of pharmaceutical products in the name of public health emergency needs to be carefully calibrated. Rushing experimental drugs to the market and shielding manufacturers from product liability can create a perfect storm.
2. Novartis and the Oncology Drugs Scandal (2014)
Blunder: Novartis was accused of being involved in a scheme where they used illegal marketing tactics, such as bribing doctors to prescribe cancer treatments in exchange for kickbacks and making co-payments for patients to boost sales.
Novartis sold Gilenya for the treatment of relapsing forms of multiple sclerosis (MS). The government alleged that, in October 2012, Novartis learned from the contractor managing Novartis’s free drug program for Gilenya that over 300 patients who were receiving free drugs at the time would be eligible for Medicare in 2013. Novartis and the contractor transitioned those patients to Medicare Part D so that, in the future, Novartis would obtain revenue from Medicare for these scripts. Knowing those patients could not afford the copay for Gilenya, Novartis developed a plan with a foundation so that Novartis could cover these copays.
Novartis also sold Afinitor, which was a second-line treatment for advanced renal cell carcinoma (RCC) and a treatment for progressive neuroendocrine tumors of pancreatic origin (PNET). The government alleged that Novartis learned that in 2010, it would be the only donor to an RCC copay assistance fund operated by a charitable foundation. Novartis told the foundation that it would donate to the fund only if the eligibility definition was narrowed and ensured a greater amount of copay assistance would support patients taking Afinitor. Thus, the fund disproportionately assisted patients taking Afinitor compared to other RCC drugs. Novartis asked another foundation to open a copay assistance fund to pay copays for PNET patients taking Afinitor.
According to the U.S. Attorney Andrew E. Lelling for the District of MA, “Novartis coordinated with three co-pay foundations to funnel money through the foundations to patients taking Novartis’ own drugs,” which essentially “functioned as a kickback scheme that undermined the structure of the Medicare program and illegally subsidized the high costs of Novartis’s drugs at the expense of American taxpayers.”
In the second matter, Novartis paid $591 million to resolve False Claims Act (FCA) allegations that it paid kickbacks to doctors to induce them to prescribe Novartis brands Lotrel, Valturna, Starlix, Tekturna, Tekturna HCT, Tekamlo, Diovan, Diovan HCT, Exforge, and Exforge HCT. U.S. alleged that Novartis hosted tens of thousands of speaker programs under the guise of providing educational content, when in fact the events served basically as bribes to doctors. Novartis knew that many of these programs were nothing more than social events held at expensive restaurants, with little or no discussion about the Novartis drugs. Indeed, some speaker events never even took place, but the speaker was still paid.
Now, I need to be fair and provide some perspective. When I was a pharma sales rep, I hosted many such events. It was not fast food, some doctors attended, and alcohol was served. However, I cleaned the cupboard of just about everything I knew about Plavix, Zyprexa, Ambien, Lantus etc. No doctor was ever paid if he/she did not attend, and his/her family was not invited.
“For more than a decade, Novartis spent hundreds of millions of dollars on so-called speaker programs, including speaking fees, exorbitant meals, and top-shelf alcohol that were nothing more than bribes to get doctors across the country to prescribe Novartis’s drugs,” said Acting U.S. Attorney Audrey Strauss for the Southern District of New York. “Giving these cash payments and other lavish goodies interferes with the duty of doctors to choose the best treatment for their patients and increase drug costs for everyone.”
The government’s complaint further alleged that Novartis sales representatives, on the instruction of their managers, selected high-volume prescribers to serve as the paid “speakers” at these events to induce them to write more prescriptions. Doctors were dropped if they didn’t. This lawsuit was initially filed under the whistleblower provision of the FCA. As part of the settlement, Novartis also paid an additional $48,151,273 to resolve state Medicaid claims.
Fallout:
- Novartis agreed to pay over $642 million in separate settlements resolving claims that it violated the FCA.
- The first settlement pertained to the company’s alleged illegal use of three foundations as conduits to pay the copayments of Medicare patients taking Gilenya and Afinitor. Novartis agreed to pay $51.25 million.
- The second settlement resolved claims arising from the company’s alleged payments of kickbacks to doctors. The Anti-Kickback Statute prohibits anyone from offering or paying, directly or indirectly, any money or thing of value — to induce referrals of items or services covered by Medicare, Medicaid, and other federally funded programs. This prohibition extends not only to improper payments to providers, but also to the improper payment of patients’ copay obligations.
- Novartis entered into a 5-year corporate integrity agreement (CIA) with HHS agreeing to significantly reduce the number of paid speaker programs and the amounts spent. Speaker programs may only occur under limited circumstances and in a virtual format.
- Novartis also implemented measures to be independent from any patient assistance programs to which it contributes.
- The CIA instituted multi-faceted monitoring of Novartis’s operations and obligated company executives and Board members to certify compliance in brand management.
- The claims resolved by the settlements are allegations only; there was no determination of liability.
Lesson Learned:
- Ethical conduct in sales and pharmaceutical marketing practices is non-negotiable. Scandals damage a company’s reputation and can result in large financial penalties.
- Patients also question whether doctors are making the best decisions about their health without conflict of interest.
- Kickback schemes further exacerbate drug costs and burden to the health care system.
- Whistleblower laws work and expose unethical business practices.
BTS Consulting is a full-service strategy and marketing consulting company. With our background as laboratory researchers developing diagnostic tests and discovering drug candidates, senior product managers, and pharmaceutical sales professionals, we have proven to be a valuable resource to develop content for pharmaceutical, medical device, diagnostics, and health service providers. We look forward to collaborating with you.
